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May 06, 2007

"I guess nobody can stay on top forever." — Veteran GM (GM) employee Walt Novak on news that Toyota (TM) overtook GM in first-quarter global unit sales, as reported by The New York Times

One of Wall Street's big-time Republican fund-raisers, Morgan Stanley (MS) CEO John Mack, has told BusinessWeek that he and his wife, Christy, are endorsing Democratic Presidential candidate Hillary Clinton, whom they supported for re-election as senator.

Mack previously reached Ranger status in Republican campaign finance circles by raising at least $200,000 for President George W. Bush's reelection in 2004. (Former Goldman Sachs (GS) CEO Hank Paulson, now U.S. Treasury Secretary, raised a Pioneer-worthy $100,000.) Mack, who says he'll stay a registered Republican, was also considered a possible candidate for various Bush Administration posts over the years.

It's too early to tell who the other major bank chiefs will back. But Mack's switch could tip the balance of power toward the Democrats. According to nonpartisan contribution tracker PoliticalMoneyLine, three of the other top six bank CEOs (Goldman's Lloyd Blankfein, Lehman's (LEH) Richard Fuld Jr., and JPMorgan Chase's (JPM ) Jamie Dimon) have favored Democrats in their political giving patterns over the past few years. Bear Stearns (BSC) CEO Jimmy Cayne is strongly Republican. Citigroup's (C) Charles Prince and Merrill Lynch (MER) CEO Stan O'Neal have bipartisan donation habits.

Why did Mack switch to a Democratic Presidential contender? It started four years ago, when Senator Clinton spoke at Credit Suisse (CS), where Mack was then co-CEO. Clinton, he says, appeared willing to work with Republicans and had a firm grasp of financial industry and health-care issues. Mack is a board member of New York-Presbyterian Hospital. Christy, a doctor's daughter, is president of the Bravewell Collaborative, a medical foundation. "I know we're associated mainly with the Republicans, but we've always gone for the individual," says Mack, who gave almost $70,000 to Republicans in the past five years, vs. $10,000 to four Democratic congressional hopefuls, including Clinton. Mack's endorsement, Clinton told BusinessWeek, "sends a signal that we need to get beyond politics as usual and the partisan divide."

To the list of our eco-problems add one more: We're running out of soil. In Dirt: The Erosion of Civilizations, David Montgomery explores our primordial dependency on fertile ground and our habit of treating it like, well, dirt. Just as healthy soil played a central role in humanity's early successes, abuses of land have doomed more than a few promising peoples. In the past, the University of Washington historian writes, farming cultures bounced back. A fresh field was always over the next hill or across the sea. No more. Arable land is maxed out. Bad water policies, deforestation, and industrial farming mean dirt is being washed—and blown—away faster than nature can replace it. Chemical fertilizers help, for now. But rising energy costs and more land loss point to looming food crises. There are solutions, Montgomery says: Make more soil through large-scale composting. To cut erosion, poke seeds into the earth rather than tilling whole fields. Treat dirt with a little more love.

Zillow.com, the Web site that lets you peek at the estimated market values of 50 million homes, is in a prickly spot in Arizona. The state Board of Appraisal has ordered it not to provide its computer-generated "Zestimates" for home values in the state because it isn't a licensed appraiser. Officials issued two cease-and-desist orders, then turned the matter over to the criminal division of the state Attorney General's office, which is investigating, says Deborah Pearson, the appraisal board's executive director. Some state lawmakers are trying to rein in the board, but a first attempt to permit Zestimates went awry in the state House of Representatives on Apr. 24.

Zillow says its estimates aren't formal appraisals, so it doesn't require a license. It also hopes to "engage in a productive dialogue" with board officials. The stakes for Zillow, which issues millions of estimates monthly, are high: Its Zestimates are the ad-supported site's biggest draw, and 25 states have similar licensing laws.

Now the French can vote with their investments: Ahead of the country's May 6 presidential election, Société Générale (SCGLY) has been marketing two funds—one containing stocks the bank thinks would benefit from a win by conservative Nicolas Sarkozy, the other tailored to a victory by Socialist Ségolène Royal.

The portfolio assuming a Sarkozy victory includes shares in big employers such as hotel group Accor and food-services giant Sodexho Alliance (SDX), both of which could flourish under Sarkozy's plan to scrap France's rigid 35-hour workweek law. In the other fund: companies such as tiremaker Michelin and advertising giant Publicis Groupe (PUB), which could benefit from a Royal proposal to grant tax breaks to businesses that forgo big dividend payouts to plow earnings back into operations.

Despite the candidates' diverging economic rhetoric, about half the stocks in both funds are the same. Both include building-materials company Saint-Gobain, water- and waste-treatment group Veolia Environnement (VE), and engineering giant Alstom. Both Sarkozy and Royal pledge greater spending on housing construction and the environment, a Société Générale spokesman explains, and both favor support for national champions like Alstom, which got a government bailout when Sarkozy was Finance Minister. Given that sort of consensus, "it is not easy to discern the market impact" of a win by either candidate, the spokesman says. That may help explain why neither fund is a star performer. Both have risen just 5% since launching in February, barely budging after Sarkozy and Royal won their runoff slots on Apr. 22.

Workplace-violence consultants report a flood of calls from corporate clients in the wake of the Virginia Tech shootings. "Everybody's nervous about all the potentially threatening people they put off dealing with," says James Turner, president of International Assessment Services in San Diego. On-the-job killings have plunged since 1994, but only because of fewer homicides in places like taxis and convenience stores. Workplace homicides by "associates"—current and former co-workers, customers, and clients—are up overall since 1997.

The President's signature domestic program—the No Child Left Behind Act—is languishing on Capitol Hill, and a politically weakened George W. Bush is counting on corporate executives to lead a rescue. If Congress fails to beef up the law in 2007, the Administration fears its plans to expand the program will fall victim to election-year politics.

Executives say the 2001 law—which toughens standards in primary and middle schools, mandates annual tests, and holds states accountable for underachieving schools—is essential to providing math and science skills needed to keep the U.S. competitive.

Like many executives, the Administration wants to expand the program into high schools. "There's no time to waste," says Education Secretary Margaret Spellings.

But the Iraq War has sapped Bush's political capital, and a $248 billion budget deficit complicates attempts to expand federal programs. There are also obstacles at both ends of the political spectrum: Conservatives want to cut the federal role in schools, while teachers' unions don't like the testing regimen.

Trying to overcome all this, 80 companies—including Intel, Ernst & Young, and Microsoft—have joined the Business Coalition for Student Achievement. The group is pushing new members of the House and Senate education committees to review and expand the law. They'll also target key lawmakers from swing states. Another group, including U.S. Chamber of Commerce boss Thomas Donohue and former Clinton White House Chief of Staff John Podesta, is holding weekly strategy sessions on strengthening the act. "Tom Donohue and I, we don't agree on that much," says Podesta, now CEO of the liberal Center for American Progress. "[But] this is not a Left-Right issue."

To join a debate about day care, click here.

Is the Tooth Fairy an economic prognosticator or just penurious these days? For the 6- to 10-year-old set, losing a tooth this year is less rewarding than it was in 2006, according to the latest poll conducted by Securian Dental, a corporate health plan provider. While the gifts range from 25 cents to $20, the survey of nearly 1,000 Securian customers found, the average under-the-pillow payout is just $1.71, down 15% from last year—17%, adjusted for inflation. Indeed, calculated in real terms, the amount is the lowest since 2000.

The 2007 number is puzzling, says Marty Weiland, an operations analyst for Securian, because the average "usually reflects" the health of the economy, which has been chugging along. "Maybe the Tooth Fairy didn't invest as well as the general public," he says.

The last time former junk-bond king Michael Milken got this caliber of takeover artists all in the same room, he was hosting his Predators' Ball. This month the setting was the annual Milken Institute Global Conference in Los Angeles, where an Apr. 24 panel included Apollo Advisors' Leon Black, Texas Pacific Group's David Bonderman, Carlyle Group's David Rubenstein, and buyout pioneer Thomas Lee.

One topic: The new trend of private equity firms selling shares to the public. "I wouldn't be surprised if all of the major firms are public four years from now," Rubenstein said. The quartet, who together manage more than $100 billion, also discussed Congress' efforts to tax their fees as income rather than at lower capital-gains rates. Mostly though, the talk was about how long their fat annual returns can last. "Money is gushing in the streets," Bonderman said. No one disagreed. What book are you recommending to friends or colleagues?

"Team of Rivals, by Doris Kearns Goodwin. It's a marvelous book about Lincoln's unique leadership style. Also, Before the Dawn, by Nicholas Wade, which traces early history, before the invention of writing.—Richard Parsons, chairman and CEO, Time Warner

"The World Is Flat, by Thomas Friedman. Most everybody has moved on, but I'm an old fogey. I think it's a great book with a great message, and I still tell everybody to read it.—Jim McNerney, chairman and CEO, Boeing

"The Global Class War, by Jeff Faux. It lays bare the way in which trade policy is aggrandizing Wall Street financiers at the expense of working Americans.—Leo Gerard, president, United Steelworkers